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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Brendan W who wrote (6485)	3/30/1999 8:03:00 PM
From: Michael Burry	Read Replies (2) \| Respond to of 78507

Wayne's right. If you are buying back shares above book value, then you are decreasing your per-share book value. If you think about it a bit, it makes sense. Similarly,buy shares at less than book value = increase per share book value. WHX is a company doing this. And issue shares above book value = increase per share book value. Berkshire is a company that did this. Mike

To: Brendan W who wrote (6485)	3/31/1999 9:24:00 AM
From: James Clarke	Read Replies (2) \| Respond to of 78507

<<Wayne, it is my understanding that dividends and share repurchases both decrease aggregate book value. They are a return of capital and decrease the equity. My accounting is not good enough for me to tell you what the accounting transactions would be. I think it decreases the equity dollar for dollar (a dollar repurchased is a dollar decrease in book value).>> Now take that one more step and we've got it. The transaction also retires a share. Book value per share is what we're trying to figure out. It seems clear now that if you buy back shares above book value, BVPS goes down, and if you buy back shares below book value BVPS goes up. jjc

To: Brendan W who wrote (6485)	3/31/1999 1:42:00 PM
From: Walter in HK	Respond to of 78507

Distorted Return on Equity: Has anybody ever seen a writeup of this ? Writing down the Equity to reflect pension benefit cost is one distortion of ROE. The other is stock buy-back where the market is at a multiple of book value. If you only reduced the equity account by the bookvalue, there would be no distortion. But you have to debit with the amount paid for the stock. Return on Equity used to be such a good measure for the quality of the management. Now GM has a ROE of 35 % or whatever. Means nothing, or you have to adjust it, find out by how much in some old Annual Report 8-) What is the meaning of Equity now ? Accountants are doing it wrong.